I want some accurate information from people who have good experience of this.

My understanding is that Tranche EMI is meant for Construction Linked
Plan (CLP) - when for some reason (i.e. dont trust builder) you are
wanting to go only for CLP.But on the basis of your salary, you can
afford the full EMI calculated for your entire loan. So your loan is
released as per CLP demand letters only, but you start your full EMI
from day 1. In the beginning, you pay back a big chunk of principal
disbursed and of course the full interest of the disbursed amount.

When your full amount is disbursed in 3 years time, you have already
paid back some of the principal. So your EMI is based on a total
principal sum which is less than full sum of CLP. For example, suppose
full CLP price is 30L. You go for tranche EMI, they release 3L every
2-4 months. You pay back EMI of -say- 30,000 PM (for ease of discussion) which includes the interest and part of principal. After 3 years, your outstanding amount will be only 21L principal - because you paid back30,000 x 36 = 10,80,000 including - say- 9L of principal and rest interest. So now your remaining 12 years (for 15 year loan) you pay 21000 per month.

Of course, bank makes the EMI amount same for before and after the
full disbursal by doing an accurate calculation, this was just for
illustration, but the idea is same - you balloon your principal repayment in the first 3 years. So if for a 30L loan the regular EMI is say 1000 per
Lakh per month, then with tranche EMI, it will become less, say 900
per lakh per month.

This is my current understanding, subject to correction by those who
have actually taken the loan.

Has anyone taken Tranche EMI? What is the actual EMI per Lakh?

My query was to compare tranche EMI with Downpayment (DP). Since builder will give discount for DP, amount of loan will become less - which
will also make the EMI less. Suppose there is 10% DP discount, 30L
flat is now for 27L. So obviously EMI will be less.

I was wondering about the difference in EMI between tranche EMI - which is on CLP which is safer in case of delays - and availing DP discount and
thereby reducing EMI.

Since both methods reduce the loan size, in which method will we pay more to the bank?

Just an academic question to understand the financial implications - also, if Tranche EMI on CLP works out same or better than DP, then why should we pay the full amount to the builder and reduce his incentive to complete the work on time?

Would appreciate input from those who have analysed these situations.



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  • Good point ramesh yahoo. Builders offering DP discounts are dangerous.

    My point about 20% discount was not that I wanted it, but that 10% is not worth it.

    Re: Pre-EMI, avoid it. Go for tranche EMI instead - on a CLP - thats what we are discussing after all!!!!

    My point is, with or without a loan, CLP is financially the best
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  • rogern: Thanks for the EMI function tip :)
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  • Originally Posted by Venkytalks
    Good point ramesh yahoo. Builders offering DP discounts are dangerous.

    My point about 20% discount was not that I wanted it, but that 10% is not worth it.

    Re: Pre-EMI, avoid it. Go for tranche EMI instead - on a CLP - thats what we are discussing after all!!!!

    My point is, with or without a loan, CLP is financially the best

    Hey venky..seriously speaking i heard trench EMI first time..do you have idea of any other Bank other than HDFC providing same product?
    Secondly, In simple Pre-EMI can we pre pay the principal amount also?
    e.g. loan amount is 30L and bank has disbursed only 8L till now..so can we make some payment that will contribute to that principal amount?
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  • Hi deepak mittal.

    Yes, pre-emi pays only interest. Full EMI with principal and interest starts after 3 years if you opt for pre-EMI option.

    Usually people opt for pre-EMI if they cannot afford both full EMI and rent on their salary.

    But if you can afford, you should pay as much EMI as possible in the early part of the loan with CLP. This pays back a lot of principal and little of interest, so when full loan is disbursed, your principal becomes less by about 10% (same as your so-called downpayment discount).

    According to earlier posts, every bank will allow this in theory - in practice, they might not like it (its against the banks "interest" to have a lot of principal paid back quickly :)

    Its a good scheme for own flat from reliable builder.

    Not so great for investors and speculative builders - there a pre-EMI is better since there is less financial involvement (tranche EMI means much more is paid, almost like the EMI of a downpayment)
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  • Venky good pt.. I agree totaly on your views...

    Do you know of any bank other than HDFC who have this kind of product?

    Originally Posted by Venkytalks
    Hi deepak mittal.

    Yes, pre-emi pays only interest. Full EMI with principal and interest starts after 3 years if you opt for pre-EMI option.

    Usually people opt for pre-EMI if they cannot afford both full EMI and rent on their salary.

    But if you can afford, you should pay as much EMI as possible in the early part of the loan with CLP. This pays back a lot of principal and little of interest, so when full loan is disbursed, your principal becomes less by about 10% (same as your so-called downpayment discount).

    According to earlier posts, every bank will allow this in theory - in practice, they might not like it (its against the banks "interest" to have a lot of principal paid back quickly :)

    Its a good scheme for own flat from reliable builder.

    Not so great for investors and speculative builders - there a pre-EMI is better since there is less financial involvement (tranche EMI means much more is paid, almost like the EMI of a downpayment)
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  • Originally Posted by deepak_mittal
    Hey venky..seriously speaking i heard trench EMI first time..do you have idea of any other Bank other than HDFC providing same product?
    Secondly, In simple Pre-EMI can we pre pay the principal amount also?
    e.g. loan amount is 30L and bank has disbursed only 8L till now..so can we make some payment that will contribute to that principal amount?


    In all banks you can start your full EMI instead of only Pre-EMI. HDFC has a special facility where instead of full EMI, you can even choose a different amount for Tranche EMI.

    It is also possible to pre-pay the partially disbursed principle. However this depends on your bank's terms for pre-payment.
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  • Amjamirs2, I agree.

    SBI gives loan only on CLP and permits full EMI as calculated to be paid back - basically they have only tranche EMI.

    HDFC permits chosing the EMI in the first 3 years - according to repayment capacity.

    Axis I think - not sure - puts a 25% limit on how much principal can be paid back in first 3 years.

    All banks permit full EMI to start immediately - basically tranche EMI. But they dont advertise the benefits because bank earns less interest on the same disbursal on tranche EMI - so they keep quiet and dont try to educate the buyer.

    Prepayment is very different - there is a penalty for it with most banks.
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  • Thanks Vanky

    This is info I was looking since morning. basically i had purchased a flat in Noida and talking to ICICI for CLP plan loan. Their executive suggest me go for DP instead of full EMI from start-up. they have started calculating me benefits and all..same doubts come to my mind for which venky you have put in your first post here..and you got calculator..

    now based on yr calculation, I am sure DP is no longer better than full EMI..thanks for it..anyway i will try to do my calculations also..:)
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  • just want to share my calculation on DP vs full EMI in under construction plan/

    I have purchased a flat ard 30 lakhs..planning to take loan of 20 lakhs..

    Loan amount..20 laks
    duration 15 years
    ROI 8.75%

    CLP..with full EMi of 19989

    total cost is 2998463

    DP with full EMI of 16990

    Total cost is 1358313+170000=3058313

    so net net full EMI is better in terms of money also..and risk is also less..

    Comments welcome..

    Total cost is 1358313+170000=3058313

    so net net full EMI is better in terms of money also..and risk is also less..

    Comments welcome..
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  • Tranche EMI

    I was searching on Tranche EMI's benefits and ended up here. Very valuable information here.
    One question about the EMI calculator uploaded here. When disbursment is on CLP, why EMI is calculated for total loan amount?
    I mean, when disbursment is done partially and not full loan amount, then EMI should be calculated based on the amount disbursed and not on full loan amount, right?
    Calculator shows me EMI paid from first month till last month same. This factor will also change the calculation a lot.
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  • EMI remains constant through out your loan period irrespective of bank's disbursement amount. However, interest is calculated on the disbursed amount only. Amount after subtracting Interest from EMI goes towards your principal repayment.
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  • Originally Posted by kasavgp
    I was searching on Tranche EMI's benefits and ended up here. Very valuable information here.
    One question about the EMI calculator uploaded here. When disbursment is on CLP, why EMI is calculated for total loan amount?
    I mean, when disbursment is done partially and not full loan amount, then EMI should be calculated based on the amount disbursed and not on full loan amount, right?
    Calculator shows me EMI paid from first month till last month same. This factor will also change the calculation a lot.


    Answered in the noida forum here

    https://www.indianrealestateforum.com/forum/city-forums/ncr-real-estate/noida-real-estate/10285-loan-comparison-clp-on-tranche-emi-vs-downpayment-with-discount?t=12647
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  • Originally Posted by amjamirs2
    It is good to have a completion based payment to builder. However you should start full EMI from first month itself. This way you repay the loan much earlier than expected tenure.
    Please check the attached file explaining calculations. This is a rough caclulator I created in EXCEL. Good to understand your home loan.

    amjamirs2, Your XLS is password protected, can you PM the password to unprotect?, need to play around few things as per my need.

    Excellent tool you have made.
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  • @amjamirs2, ignore the last post, I got the workaround, copy and pasted into the new worksheet, now no more protected sheet issue :)
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  • Not able to download the attachment. Can you share again? amjamirs2;
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